Spotlight on Deputy Commissioner Louise Clarke

There were some significant developments in the private wealth space in 2025. What’s front of mind for you in 2026?

We're responsible for monitoring the tax compliance of just over 271,000 privately owned and wealthy groups that operate around 1.3 million entities and control over $4 trillion in net assets. As you can imagine, this is a diverse and complex population of groups that vary in size and wealth. We have an ageing demographic for owners of private groups, so we're seeing many owners preparing for the transition of their mature family businesses and associated wealth to the next generation or their businesses being sold to third parties. At the same time, we're also seeing increased investment activities involving more complex ownership, financing and governance arrangements. Associated with that, we're also seeing growing businesses established by Australians being sold to private equity interests. We're looking at these sales as part of our Commercial Deals Program.

Keeping on top of changing behaviours in the private wealth segment is important for us, so that we can quickly respond to emerging trends and areas of concern to provide timely advice and guidance and apply compliance resources where they're needed. Last year, we issued a range of advice and guidance products on topics including some relevant to private groups undertaking succession planning, and those groups in the property and construction sector, including most recently a taxpayer alert TA 2026/1 to address contrived property development arrangements that use long-term construction contracts to defer income and exploit losses between related parties.

We currently have several significant matters before the courts, including Bendel and Merchant. Both of which are before the High Court. I look forward to getting judicial clarity on some important legal principles that are very relevant for our market.

Effective tax governance continues to be a key focus across the market and not just the top end. The recent Full Federal Court decision in S.N.A. Group, which considered the deductibility of expenses claimed in relation to intra-group transactions within a closely-held group. While the decision is still within the appeal period and subject to further judicial consideration, it's an important reminder that arrangements, particularly within entities in a closely-held family group, should be properly documented.

There's been a lot of attention on family trust elections. What would be your key takeaways for trusts and advisers?

I have 3 key takeaways:

1. The clock is ticking – if your private group has family trust elections (FTEs), now is the time to self-review, pay and put in your request for remission of general interest charge (GIC). Up until 31 December 2026, we'll look favourably on GIC remission requests in these circumstances and may remit up to 80%.
2. 45 day holding rule – even if a trust is making a distribution referable to a distribution with franking credits attached to a beneficiary who has made an FTE, the beneficiary may not be eligible for franking tax offsets they receive from it. You'll need to check if the holding period rule applies. Check out our guidance.
3. Errors or mistakes on your election – when making, varying or revoking an election, incorrect or incomplete labels doesn't automatically render the form invalid. We have heard that some people may be concerned about this, but as is the case with all approved forms, we take a sensible and practical approach. However, changing your mind down the track on who you think should have been the specified individual (when you're no longer eligible to vary your FTE), does not fall into that scenario.

Succession planning was a major focus in 2025. How are you now seeing private groups approaching succession, and how has the ATO’s response evolved?

Over the past 12 months, our approach to succession planning for privately owned and wealthy groups has continued to mature, with an emphasis on guidance and education alongside our ongoing risk focus. We’ve refreshed our external messaging and published some resources to help private groups understand and manage the tax side of succession planning, including reinforcing the role of sound tax governance in reducing unintended outcomes.

Three key themes we're seeing in our engagements with private groups:

1. Situations where planning has been undertaken without a full appreciation of the tax consequences, giving rise to unforeseen and sometimes significant consequences arising from decisions made many years ago.
2. Errors around the fundamentals, such as eligibility for concessions and rollovers, sometimes caused by, or exacerbated by, poor governance or record keeping, or both.
3. Arrangements that appear to have been put in place to access concessions and rollovers.

To support succession planning, we expect to publish a practical compliance guideline on back-to-back rollovers. It will explain when we're more likely to apply compliance resources to consider the application of Part IVA of the Income Tax Assessment Act 1936 (the general anti-avoidance provisions of the income tax law) to an arrangement that comprises multiple CGT rollovers.

Looking ahead, succession planning will remain a key focus area for us, and our message to privately owned and wealthy groups is consistent: start early, review plans regularly as circumstances change, and fully consider tax implications – not just at the point of transition but over the life of the arrangement and for the next generation.

What else can private groups and advisers expect to see in 2026?

We'll continue to implement holistic and tailored strategies to target the drivers of tax risk – ranging from education, guidance and preventative measures such as nudge messaging, through to compliance reviews, audits and assurance engagements.

We continue to see private groups using business funds or assets without considering the tax consequences. Division 7A isn't going away and we'll remain focused on the fundamentals: making sure complying loan agreements are in place, making minimal yearly repayments and applying the correct benchmark interest rate. This includes scrutinising requests for the Commissioner's discretion under section 109RB. We're also expanding this focus into arrangements aimed at circumventing Division 7A and the application of Division 7A where business assets are provided to shareholders or their associates.

Advisers should also be aware that for PCG 2021/4 Allocation of professional firm profits – ATO compliance approach, the 2-year transitional period under the PCG has expired and doesn't apply to 2024–25 returns. We'll review profit allocation arrangements and re-engage where high-risk arrangements persist. You're strongly encouraged to assess your profit allocation arrangement using the risk assessment framework. If you self-assess to be in the red risk zone, you can expect we'll prioritise our compliance resources towards your tax affairs. These guidelines can only be applied to arrangements that pass the 2 Gateways. If you derive income from other sources, such as personal services, you can't rely on these guidelines to allocate profits.

Any final messages?

While our strongest governance focus is on Top 500 and Next 5,000, all private groups should invest in sound, proportionate tax governance and internal controls. As groups grow, restructure, or plan for succession, tax complexity increases and frameworks must keep pace – supported by regular self-review and, where needed, specialist advice.

I really encourage private groups to engage with us early and be transparent. We’ll continue to improve education and support for those acting in good faith, including where issues are identified and addressed. But where there's repeated non-engagement or deliberate non-compliance, firmer action will follow.

For more information, see our Areas of focus page.